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If this were available, remember that the interest is not going to be deductible and the rates are going to be much higher than a secured loan.

Ironically, since you personally guarantee an unsecured line, the bank has to sue you to collect, rather than foreclose or repossess collateral. When they are awarded a judgment, the collection of that judgment can be filed as a lien against your house in all states that I am familiar with. Very ironic for an unsecured loan, isn't it.

If the bank takes the collateral (boat), they can still pursue a judgment for any shortfall, but are then required to dispose of the collateral at fair value to determine the shortfall. That is hard for them to prove, since most banks prefer fast recovery to full recovery. They often ignore the shortfall as a result and just leave it open on your credit report as repossessed collateral or unpaid credit.

Just more to consider.

03-21-2011 09:49 PM

mikehradecky

I don't know how old you are, but life is short. If you wait until you can afford to pay cash, you will never own a boat. Not a decent one.

Don't buy a "Fixer Upper" either. You'll be sitting on the hard while your wife watches you work on the boat, weekend after weekend. And it will cost you more than if you just financed the nice boat. And you might loose the wife.

So finance a nice boat and go sailing with your peeps. You won't regret it.

03-21-2011 08:25 PM

lans0012

Unsecured line of Credit

Before the financial crisis (ie I don't know if they do these anymore) I was given an unsecured line of credit from Bank of America for 20k at 8% open for 10 years, although I never ended up using it and later closed it.

In my mind that would be a great way to go if you don't use a home equity loan. "In theory" most older boats will hold their value as long as they are properly maintained. As you pay the loan down you can still write yourself a check from the line for replacing things that wear out like 3k here and 3k there for sails, engine rebuilds, bottom jobs, dinghies, and other things that you'll eventually break.

I ended up paying cash for a smaller one and then saved for a while and bought the one I wanted before. Everyone's situation is different, my job wasn't secure enough for me to feel comfortable financing.

I think the credit line is a great way to go.

03-21-2011 03:58 PM

Minnewaska

If you buy with a loan secured by a boat that meets the second home test (bed, head, galley) the interest will certainly be deductible. The collateral has to be the boat, you can't borrow unsecured and just say you used to the money to buy the boat.

However, if you don't already itemize your deductions, there may not be enough interest paid on such a small loan to warrant it.

03-21-2011 03:31 PM

MikeinLA

If you do use a home equity loan, please check with your tax person on the deductibility of the interest. There are limits which involve the basis of your home, etc. It is often overlooked by the IRS, but you can be liable for recapture under some circumstances. Wouldn't want you to get surprised. I agree to pay cash if you can.

I just use them and they were great, process was extremely easy and pain-free. You can get a pre-approval. Amount borrowed (as long as it is around 20K) is not the issue, the issue is that you will pay a little more interest, but they do finance boat of that price and up to I believe 25 year old.
Good luck

interesting, thanks.

03-21-2011 03:26 PM

eSailor

my situation: I am in my mid 30's and basically grew up on the bay. parents had cabin cruisers while I was young and I talked my dad into a 1971 - 31' Westerly sailboat when I got out of college. We had that boat 10+ years (and surprisinly it was really realiable) and he sold it 2 years ago. I also spent some time on club race sailboats from 19' - 45'.

Looking at late 80's to early 90's sail boats in the 30' range. Not looking for performance or bluewater capabilities. Just a day/weekend sailor for the Chesapeake. I want something a little newer and better amenities / more comfortable than the Westerly. basically Pearsons, Catalina's,Hunters, O'day, etc......

A boat that price is probably fully depreciated...as there aren't many NEW sailboats that would be in the $20-30k range. Home equity would likely be the ONLY way to go. As for if anything happens...well, since the boat is fully depreciated, sell it and pay off the equity. You'll likely break even after all the tax deductions you'll be able to take.

good point.

03-21-2011 01:22 PM

Kiltmadoc

IMHO: from reading your original post, I would recommend that you wait until you have the cash. As you said: you are worried about using an equity loan because you wouldn't want your house at risk if something happened.
For example; my boat partner and I bought a boat for 25,500 in 2010, with taxes registration etc, that quickly became 30,000. We then spent another 13,000 upgrading/storing/mooring/repairing...this year alone!

We have 3,000 in the bank and are expecting to have to spend another 4000-5000 due to the fact that the previous owner never took care of the cushions, and now they are soaked with mold; requiring burning them and getting new ones.

If you cant handle these kind of expenses out-of-pocket, you have no business spending money on a toy like a boat.

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